Global Trends by Martin Khor

Monday 30 August 2010

Urgent need for funds to fight climate calamities

The worsening plight of Pakistan in coping with horrendous floods highlights the urgent need to set up a proper system of assisting and financing developing countries to prevent and manage the effects of climate change and natural disasters.


The flood calamity in Pakistan has again highlighted the urgent need to set up a proper global system to help developing countries affected by climate change and natural disasters.

Pakistan's crisis worsened in the past week, as the Southern region was also inundated by the floods which had started in the North and then spread to the Central region.

About a million people were evacuated in the Southern Sindh province in the past few days as the Indus river burst its banks in several places.

As the scale of the flooding increased, the estimates of costs of the damage and reconstruction also mounted.  The Pakistani High Commissioner in London said that more than US$10-15 billion is needed for reconstructing Pakistan.  But that was two weeks ago, before the calamity affected new areas in the South.

The New York Times reported:  “Even as Pakistani and international relief officials scrambled to save people and property, they despaired that the nation’s worst natural calamity had ruined just about every physical strand that knit this country together – roads, bridges, schools, health clinics, electricity and communications.

“The destruction could set Pakistan back many years, if not decades, further weaken its feeble civilian administration and add to the burdens on its military.”

The inundation extends for scores of miles beyond the banks of the overflowing Indus River and its tributaries, said Iqbal Zahid, a Pakistani Navy commander in charge of Sindh province's rescue operations.  He said the infrastructure all the way from the northernmost Khyber-Pakhtunkhwa province to the southernmost Sindh province is ruined and will take many years to rebuild.

According to the New York Times article, more than 20 million people are now affected.  The government estimates that the floods have washed away 5,000 miles of roads and railways, 7,000 schools and over 400 health facilities.

Just to build about 500 miles of road in war-ravaged Afghanistan, the United States spent $500 million and several years.  The US aid agency has spent $200 million to rebuild just 56 schools, 19 health facilities and other services since the earthquake in the Pakistani controlled portion of Kashmir in 2005.

The article cites a study from two US universities estimating the flood damage at US$7.1 billion.  But this is probably an under-estimation.   Another news report quotes a government estimate of damage at US$20-30 billion.

The Pakistan tragedy highlights the immense need for financing by developing countries to cope with extreme weather events, an increasing number of which are caused by climate change.

The developed countries have committed to pay for the cost incurred by developing countries to mitigate and adapt to climate change, under the UN Climate Convention which was signed in 1992.

However, this commitment has remained mainly on paper. The current climate negotiations are supposed to convert the paper commitment to reality.

This week, some Ministers have been invited to Geneva by the Swiss and Mexican governments to discuss climate financing.  

The most basic issue, highlighted so dramatically in the Pakistan floods and the Haiti earthquake, is obvious need for a proper system of assisting countries affected by climate related disasters.

At present, there is no predictable or reliable system.  The affected countries simply have to rely on charity and donations.  The funds promised are usually far too little, and even less of that is eventually paid.

Thus the climate talks have to produce a proper institutional financing system, and at the top of the agenda is the setting up of a new Climate Fund.  Developing countries want it to be under the authority of the UN's climate convention, and not come under the control of the World Bank which they have bad experiences with.

Another key issue is the amount of funds needed, for mitigation, adaptation, technology and capacity building.

For mitigation (measures to prevent climate change), the World Bank's World Development Report 2010 has estimated that:  “In developing countries mitigation could cost $140 to $175 billion a year over the next 20 years (with associated financing needs of $265 to $565 billion).” 

A study in India by the Centre for Science and Environment concludes that the additional cost of generating power from renewable technologies in a low-carbon strategy compared to business-as-usual until 2030-31 is estimated at US$203 bil or about $10 billion a year. 

For adaptation (measures to cope with the effects of climate change), there are various estimates of financing needs.  Most studies are limited in scope (because they leave out several sectors and activities) and thus in their cost estimates. 

A World Bank report estimates developing countries need up to US$100 billion a year for adaptation.   This is higher than the estimate in the UN climate convention secretariat report which estimates the cost at $27-66 bil a year.

The most comprehensive study is by scientists led by Martin Parry, former Co-Chair of the IPCC's adaptation working group.  The study found that the UNFCCC report had underestimated adaptation costs in sectors it studied and also it left out many sectors.

If under-estimation is corrected in sectors studied, the real cost would be $68-165 bil a year.  And if we also include some areas left out in the UNFCCC report (such as damage to ecosystems and damage from weather events), the total adaptation financing needed by developing countries could total $630 billion a year.

Financing is also needed for climate technology.  The UNFCCC's technology expert group reported that the finance needs for technology are $300-1,000 billion a year.

Of this total, developing countries are estimated to have additional funding needs of $182 – 505 billion a year, for deployment and diffusion of technology.  This seems to be an under-estimate as the report controversially assumes the developing countries do not need research and development or technology demonstration, activities confined only for developed countries.

Thus, the amount needed annually by developing countries to combat climate change (US$600 billion for mitigation, another US$600 billion for adaptation, and US$500 billion for technology) is high indeed, and this does not yet take into account the payment for climate debt (over-using of the atmospheric space by developed countries in the past and present).

The promises so far by developed countries (US$10 billion a year in 2010-12 and up to US$100 billion a year by 2020) are very little, compared to what is needed.

As the Pakistan flood tragedy shows, the damage caused by climate change and weather events can be very high.  The challenges in preventing the calamities and managing them when they happen are also very great.

The financing system and the amounts of financing have now to be discussed seriously so that developing countries can have a chance of surviving, let alone developing, in future.